eCommerce is booming in 2020, while many of the world’s famed retailers are falling. The core of the retail business model is being reshaped, while customer expectations are helping to reshape the in-store/online experience around ‘New Retail.’ The question is, where does it all lead us in the years ahead?
Undoubtedly, 2020 has been a boom for eCommerce. The lockdowns have created a perfect storm for online stores to expand their footprint, while the majority of physical retailers have been forced to ramp-up their online capacity in the face of retail restrictions. Unfortunately, many big-box retailers have declared bankruptcy in 2020, and those still in business have been forced to close multiple stores. As we head into fall and winter, it seems that more lockdowns are on the table, which will further intensify the shift. Overall, it seems that we are on the verge of seeing a radical shift in retail not seen since last century with the boon of ‘Five-and-Dimes’ and the golden-age of Department Stores.
While some goods sell more easily online than others, we are now starting to see the beginnings of a boom in fashion eCommerce, a sector that took longer to gestate because of the need for personalization, fit, and the option for returns.
The industry is booming and by 2022 it is expected that 38% of all fashion sales will be online. One would expect that by the end of the decade, we will see the vast majority of retail sales in fashion become online, with a fusion between physical and digital experiences happening in-store.
Innovations in software, logistics, and inventory management thanks to pioneers such as Shopify, Farfetch, and a slew of others have created the backbone for New Retail. What are some dimensions of the New Retail experience?
>Less is More – Less Inventory, Less Retail Space Needed
>Tech-Enabled Experiences – Augmented Reality (AR) and other technologies becoming part of the retail experience
>Personalization and AI – as the blend between in-store and online begin blending, personalization and automated recommendation engines will help drive a ‘custom fit’
Through it all, however, the customer wants to have a relationship with the brand that goes ‘beyond a physical box.’
We are going back to the origin of the Customer Experience (CX) and needing to rethink the role that retail plays in our lives. In the same way that Department Stores in the late 19th and early 20th century inspired imagination, creativity, and the creation of social hubs in cities, we need retail experiences that combine the best of the online and offline worlds. It seems more and more likely that these types of experiences will be delivered by new players with imagination, rather than incumbents looking to survive. In the same way pioneers in the 20th century such as F. W. Woolworth and others inspired a generation of retail entrepreneurs, we need a few pioneers to blaze a path forward for New Retail.
The New Retail Experience
Much thought and investment has gone into ‘new retail’ via incumbents. Technologies like A/R (Augmented Reality) delivered via Smart Mirrors is one example how incumbents are investing in ‘new retail’ technologies to enhance the in-store experience.
Technological innovation is seen in multiple facets, as we have also seen how major retailers are investing into ‘omnichannel’ technologies that help them increase their eCommerce channels in a way that either decreases costs or increases profitability.
Resale has become a new channel for incumbent retailers to sell ‘vintage’ goods on platforms like ThredUp. Meanwhile, online luxury-resale platform Vestiare Collective has setup (a popup) shop in Selfridges in London.
To put it all in context, however, we look at American retailer Nordstrom’s and their Q2, 2020 numbers to see that incumbent retailers are still in big trouble. Looking at their stock price alone, we can see they are back near historical lows not seen since the 2008 and 2000 crashes.
This despite the fact that ~33% of the company’s sales are now online via their eCommerce channel and they continue to see a big uptick in new customers via digital channels:
That’s why ‘omnichannel’ is likely to help stem the bleeding for some major retailers, but not enough to stop it. The Retail Apocalypse ‘trend’ that started a few years ago has now been accelerated, with it already claiming big names like JC Penney, Neiman Marcus and a slew of others in 2020.
Ultimately, business model innovation will trump technological innovation in the retail model and we will likely see the real winners coming out of this crisis are those who build the retail experience from the ground up and find new ways to deliver value to customers, while simultaneously protecting/increasing margins.
Brick & Mortar / Mom & Pop businesses have been particularly hard hit in this crisis as well – and the failures will likely increase exponentially as we head into the winter months. But like F. W. Woolworth and a slew of other retail pioneers back in the day, innovative new models will emerge out of necessity.